Autonomy founder says HP’s claims off base

Share via e-mail

Mike Lynch said he was blindsided by Hewlett-Packard’s assertions of financial improprieties at Autonomy.

By Quentin HardyNew York Times
November 26, 2012

SAN FRANCISCO — Mike Lynch was in a business meeting in London on Tuesday when his phone buzzed.

A text message from a friend informed him that Hewlett-Packard was taking an $8.8 billion charge. A few minutes later, another message said HP was putting most of the blame for the write-down on accounting problems at Autonomy, the company Lynch cofounded and sold to HP last year for $10 billion. There was talk of potentially criminal activities.

Since that jolt, Lynch, 47, has been unusually candid and vocal in defending himself and the company he built. He says he was blindsided by a long-prepared public relations onslaught by HP, little of which had to do with the substance of its claims about Autonomy.

‘‘It’s been a bit of a shock,’’ said Lynch, who joined Hewlett-Packard in October 2011 but was fired by Meg Whitman, HP’s chief executive, in May. ‘‘The last time I talked to anyone there was in June.’’

Lynch was once the face of HP’s future, thanks to Autonomy’s high-end business analysis software. Last week, he became the public face of what the company said was systemic fraud.

But in charging gross improprieties at Autonomy, HP has attacked a man who may be Britain’s most notable and contentious technology executive and one of Europe’s biggest self-made successes. Lynch, 47, sits on the boards of the British Broadcasting Corp. and the British Library, and was awarded the Order of the British Empire for his service to business.

While Autonomy is not well known in the United States, it was considered a pioneer in big data, and its pattern-seeking algorithms­ are at work at more than 400 companies, including Oracle, Adobe, and, even before the purchase, Hewlett-Packard. Lynch made about $800 million from the sale.

Even with all of his money, technology smarts, and a doctorate from Cambridge, Lynch says he cannot figure out how HP thinks he has done anything wrong.

Hewlett-Packard has said that its internal investigation, sparked by a whistle-blower, uncovered major problems at Autonomy that were present before the merger. Among them were the booking of hardware sales as higher-margin software sales and resellers reporting sales that did not exist.

Lynch said Autonomy’s sales fell off a cliff after it merged with Hewlett-Packard — not because it suddenly had to account for things legally, as HP claims, but because of institutional foot-dragging.

‘‘They drove out the top 100 people from Autonomy, and a bunch of trainees were put in’’ to sell Autonomy products, he said. ‘‘HP salesmen got better commissions for selling our competitors’ products.’’

Lynch said Hewlett-Packard told him it could not formally approve Autonomy’s software for use on its customers’ servers, ‘‘when it was already running on thousands of HP machines around the world.’’ He added, ‘‘HP has core structural problems.’’

Hewlett-Packard counters that Lynch was a singular force of resistance to the merger as soon as his check cleared.

‘‘He was at every strategy session, was in person or on video for every meeting of the executive council,’’ said an HP executive briefed on the investigation who spoke on condition of anonymity because he was not authorized to speak on the record. ‘‘He wouldn’t work with anyone. Sometimes he was enthusiastic, but other times he’d say, ‘This makes no sense. I’m going back to London.’ ’’

The conversation in June with Lynch concerned several software sales by Autonomy, the HP executive said.

‘‘He was evasive, not forthcoming, or he didn’t remember,” the executive said. “After something like that, you don’t bother telling him what you are investigating.’’

Lynch said the conversation was supposed to be about his severance but became an ‘‘ambush.’’ Deloitte, Autonomy’s auditor, reviewed Autonomy’s books quarterly, he said.